EU Probe Focuses on Content and Competition

Increasing complaints by new media firms that big-name media companies are blocking their access to content has prompted EU Competition Commissioner Mario Monti to launch an investigation. Speaking before an audience of telecommunications and entertainment companies in Brussels, Monti said his office would open an inquiry later this year into the provision of content—music, films, and sports—over the Internet for such services as video-on-demand (VoD). The probe will also examine the availability of premium content via wireless for Europe's high-speed mobile network operators.

Recent developments in VoD have shown "there is currently a very intense demand in that field, hindered however by strong tendencies by established TV operators to protect their position to the detriment of new technologies and new players," Monti said. He singled out broadcasters and pay-TV operators who "acquire rights for delivery of content over technological platforms different to those on which they are active."

Such deals make it tough for VoD providers to acquire rights to fresh TV shows or movies, notes Ted Fisher, SVP of content and business affairs at LuxSAT International, a Luxembourg-based company that delivers DVD-like rental service over cable. He calls for European legislation to regulate a "fair and early window of access" to content.

While some distributors allow VoD companies in the U.S. access to content as early as 45 days after the DVD release, studios in Europe release content to VoD companies up to six months after the video release.

"The value of this content for a VoD company like ours—and we're positioning ourselves to compete in the DVD market—is greatly diminished," Fischer says. "We see no reason why VoD should be offered at a later window than DVD."

The nature—and the newness—of Europe's VoD business means a handful of VoD providers are squeezed by theaters, video and DVD rentals, pay-per-view and pay-TV, none of which want to give up their window to exclusive content, Fischer says.

"VoD is stuck between the major content suppliers and studios, which are reluctant to test new waters, and the pay-TV operators, who are trying to protect their legacy business from new media start-ups," Fischer says. "Without the content to drive service up-take, [VoD in Europe] could go the way of the 8-track tape." Such arguments no doubt prompted competition boss Monti to pledge "all the powerful legal instruments that the recent modernization of the anti-trust rules" to help new media companies such as LuxSAT gain access to premium content.

During his speech, Monti also acknowledged that access to attractive content is a must-have feature for Europe's third-generation (3G) mobile content providers to prosper. Indeed, analysts estimate some 80% of Europeans own a second-generation handset. They warn these consumers are unlikely to invest in 3G handsets unless they have access to premium content such as sports highlights and music video clips streamed by network operators.

Against this backdrop, the EU launched a separate probe in January to determine whether 3G operators had experienced difficulty licensing soccer video clips because broadcasters had deliberately shut them out. The newly announced second, more expansive EU investigation—set to begin in the second half of this year—will complement this ongoing inquiry and examine that sale of similar rights to Internet companies.

However, the content bottleneck can't be written off as intentional, argues Martin Farrimond, head of Content Solutions at BBC Technology, a wholly-owned subsidiary of the BBC. He believes it exists because new media is a nascent industry plagued by many unanswered questions. "Content owners also don't understand the revenue model. The mobile industry isn't clear about where it will make money and content companies aren't charities."

Patrick Parodi, chairman of the Mobile Entertainment Forum and general manager Europe of PacketVideo Network Solutions, agrees. "Although there may be a few isolated cases where high-quality content is not making it over to the Internet, we have seen quite the opposite occur in the mobile space," he says. In fact, several rights holders are exploring mobile-only exclusive content deals.

This, he observes, shows that market and commercial forces are at work in the mobile industry, and could well improve content access in Europe's fledgling VoD space.